Certain distributions prohibitedF1N.I.
271.—(1) A company shall not make a distribution except out of profits available for the purpose.
(2) In this Part, “distribution” means every description of a company's assets to its members, whether in cash or otherwise, except distribution by way of—
(a)an issue of shares as fully or partly paid bonus shares,
(b)the redemption or purchase of any of the company's own shares out of capital (including the proceeds of any fresh issue of shares) or out of unrealised profits in accordance with Chapter VII of Part VI,
(c)the reduction of share capital by extinguishing or reducing the liability of any of the members on any of the company's shares in respect of share capital not paid up, or by paying off paid-up share capital, and
(d)a distribution of assets to members of the company on its winding up.
(3) For the purposes of this Part, a company's profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.
This is subject to the provision made by Articles 273 and 274 for investment and other companies.
(4) A company shall not apply an unrealised profit in paying up debentures, or any amounts unpaid on its issued shares.
(5) Where the directors of a company are, after making all reasonable enquiries, unable to determine whether a particular profit made before 1st July 1983 is realised or unrealised, they may treat the profit as realised; and where after making such enquiries they are unable to determine whether a particular loss so made is realised or unrealised, they may treat the loss as unrealised.
F1Order repealed (prosp.) by Companies Act 2006 (c. 46), ss. 1284(2), 1295, 1300(2), Sch. 16 and the repeal being partly in force, as to which see individual Articles (with savings (with adaptations) by Companies Act 2006 (Commencement No. 6, Saving and Commencement Nos. 3 and 5 (Amendment)) Order 2008 (S.I. 2008/674), arts. 2(3), {4}, Sch. 2) and subject to amendments (6.4.2008) by Companies Act 2006 (Consequential Amendments etc) Order 2008 (S.I. 2008/948), arts. 2(2), 3(1)(b)(2), Sch. 1 paras. 135, 147, 148 {Sch. 2 Note 1} (with arts. 6, 11, 12) and subject to amendments (6.4.2008) by S.R. 2008/133, {regs. 2, 3}